Adding Tournament to Tournament: Combining Between-Team and Within-Team Incentives
35 Pages Posted: 5 May 2018
Date Written: April 18, 2018
We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding is likely to occur when there are only between-team incentives, and offering within-team incentives may solve this problem. However, if individuals collude, then within-team incentives may not be as effective at reducing free-riding. Consistent with the theoretical predictions, the results of our experiment indicate that although between-team incentives are effective at increasing individual effort, there is substantial free-riding and declining effort over time. Importantly, a combination of between-team and within-team incentives is effective not only at generating effort but also at sustaining effort over time, mitigating free-riding problem, increasing cooperation and decreasing collusion within teams.
Keywords: Individual Incentive, Team Incentive, Tournament, Free-Riding, Collusion
JEL Classification: C70, D72, H41
Suggested Citation: Suggested Citation